In the second of my reports from Myanmar, I shed light on the country’s energy problem

In Myanmar, a roaring sound near you is rarely a good sign. Either you’re in the jungle and there’s a tiger lurking in the corner (Burma has the largest wild cat reserve in the world). Or you’re in the city and power's just dropped out. What you’re hearing, probably, is a diesel back-up generator that's turning itself on.

Fortunately for your chances of survival, you’ll more often find yourself in the latter case. But for the rest of Myanmar, that’s hardly a relief: the country’s chronic power shortages are crippling for companies and households alike. The nation may be a good candidate for fast-tracked modernisation, but that won’t happen if people can’t charge their phones and mobile towers randomly go offline.

Myanmar is facing a catch-22. Its power infrastructure is not meeting current needs, yet as economic growth accelerates demand for electricity is booming. Myanmar’s per capital consumption is one-fourth of India’s and one-twentieth of China’s; the average American uses as much as electricity as 85 Burmese. Myanmar’s consumption figures, furthermore, mask a stark inequality within the country: while Yangon is about 80 percent electrified, only 16 percent of rural areas have access to power.

Luckily, Myanmar has examples to look to. In a paper released in March, Tim Dobermann, an economist at the International Growth Centre, observes that the country is in a situation that resembles that of Vietnam in 1995. Faced with surging demand, Vietnam’s government then managed to increase total generating capacity four times between 2007 and 2015. That wasn’t without hiccups – but the outcome suggests that putting Myanmar on the grid is not a hopeless quest.

Myanmar and Vietnam are similar in another respect: they both started off with a heavy reliance on hydropower. While the latter has since diversified, however, Myanmar’s problems partly stem from its continued dependence on hydro. Reduced river flows during the dry season – from October to May – mean power generation is intermittent at best: blackouts these days happen every few hours, Dobermann told me during an interview last Friday.

Weaning Myanmar off hydro won’t be easy. Vietnam achieved this through massive investments in natural gas generation between 1995 and 2003. Myanmar also has impressive gas reserves, but the bulk of its production is currently being exported to China and Thailand under long-term contracts. These will be very difficult to renegotiate (Myanmar’s opening to the West has thrown a chill on its relationship with Beijing). Instead of privileging the power sector, the government has earmarked new gas discoveries to industry.

So Myanmar will be tempted to turn to coal, its cheapest option. But that will come with its own problems: the country’s coal is of poor quality, meaning the fuel will largely have to be imported (from Indonesia and Australia, mostly). Coal plants also take a long time to build. And they’re unpopular, because they’re dirtier than most alternatives.

A few things could potentially help alleviate the short-term pressure. Dobermann estimates that more than a quarter of the power Myanmar generates is lost along the way. That’s partly because about half of all existing transmission lines are more than 70 years old – revamping them would increase supply even before investing in generation. Myanmar could also consider importing power from its neighbours.

Eventually, though, the country will have to invest serious money into boosting generation. The government is well aware of the urgency: it launched a National Electrification Plan last year aiming to do just this. Its energy policy, over which as many as eight different ministries previously had a say, now comes under the responsibility of the sole Ministry of Electric Power and Energy. The administration’s target is to provide countrywide power access by 2030.

Honouring this pledge will require tremendous investment. Given Myanmar’s varied topography, expanding the national grid will be long and costly (building a network in mountainous areas is very expensive). Achieving the plan’s objectives – including investments in generation, transmission and distribution – is budgeted at $10 billion over the coming 15 years.

The government won’t be able to foot the bill unless it allows the power sector to be financially viable. A first step towards this would be to bump up electricity prices, which for now don’t even allow providers to offset costs. Cutting subsidies above a certain consumption level would protect the poorest households while providing liquidity to finance infrastructure upgrades.

Privatising part of the supply chain and creating electricity wholesale markets would also incentivise companies to invest and innovate. Myanmar’s power sector remains largely state-owned and vertically integrated, which drives up costs and causes delays. The existence of several power suppliers would allow a firm to step in when another one fails, Dobermann notes. England and Chile provide an encouraging precedent. India is a good counterfactual: limits on wholesale trade are one reason why Delhi, despite boosting generation capacity over the last 10 years, has found it hard to eliminate blackouts.

The government should also push the button harder on renewables. Beyond hydro, Myanmar has enormous potential for clean energy: its central dry zone is a fertile ground for solar; wind power could thrive on some of its coasts and mountains. By contrast to large-scale conventional plants, small renewable facilities don’t need extensive transmission and distribution infrastructure. They’re also much faster to build. The government should encourage their development through feed-in tariffs (a minimum price at which producers can sell the generated power, guaranteeing their revenues).

Myanmar’s economic future relies hugely on the success of its electrification plan. Launching it was a good first step – but for the country’s leaders, there remains plenty of dots to connect.